Certain types of companies are strategic alliances in which international partners work together for mutual benefit. Companies agree to combine significant resources, costs, risks, technology and personnel. Each organization sees a chance to get something that it could not get on its own. Examples include joint ventures, subsidiaries and subsidiaries. There are two types of strategic alliances: joint ventures and 100% subsidiaries. Exporting is the shipment of domestic goods to a foreign country. Importing, the reverse, brings goods from another country. These two types of businesses create local jobs and are therefore generally favoured by governments. Both types of enterprises are controlled by customs authorities and declared in different categories as part of a country`s gross domestic product.
The main advantage of an export operation is a broader market for products, as importers can often sell products below the price of domestic items. They also retain control over how the product is designed and manufactured. But as with any international activity, there are risks associated with supply chain disruptions and currency fluctuations. There are also higher transportation costs and fares. In an international joint venture, two or more companies (usually foreign and local) agree to cooperate on a new project. Each company contributes to cooperation over time, capital or enterprise. Sometimes a company runs errands in an established company. Each partner benefits from the agreement. A partner can hope to expand its market with the help of local experts; the other partner may be interested in access to technology and advanced skills training.
The advantage is that each partner bears part of the cost burden to create and manage the joint venture. Among the drawbacks, there may be power struggles between leadership and leadership and the fact that benefits must be shared. In 2014, Sony of Japan created joint ventures in China to produce its very popular PlayStation. One company produced the software; the other company produced the material. A company may decide that instead of working with a company in a foreign country to expand its market, it is more efficient to acquire an existing business. The accepting company assumes full responsibility for the acquired company. The advantage is that the company saves transportation, distribution and storage costs, while paying local business knowledge from the employees of the subsidiary (or subsidiary). Kraft Foods, for example, bought Cadbury, an English confectionery company.
Home Depot has purchased Home Mart, a popular home improvement seller in Mexico. Finally, Wal-Mart Stores Inc. issued $2.4 billion in 2010 to acquire Massmart, a South African retail store similar to Wal-Mart with stores across Africa. Franchising allows companies to enter foreign markets at low cost, while providing local entrepreneurs with the opportunity to operate a well-established business. When McDonald`s or Subway wants to expand into a new foreign market, it often ensures that a company or individual pays for the use of its protected or protected resources such as building plans, product ingredients, revenue and management systems. The buyer or franchisee undertakes to follow product and operating procedures to protect the franchisee`s brand name and reputation. The franchisee receives a percentage of the revenue from the local operator. Benefits include relatively low risk and simple penetration for the franchisee.
The franchise requires very little capital investment or effort on the corporate side. A local franchise can avoid many of the cultural pitfalls faced by foreign investment. Risks or disadvantages include a loss of quality control and a lower return than a 100% operating company.